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39 » VISIT US ONLINE @ DSNEWS.COM let the GSEs build a capital buffer, in order to avert a Treasury advance. Today's news that Freddie Mac is reporting a modest quarterly loss only serves to heighten the importance of FHFA taking this step as soon as possible." Likewise, Independent Community Bankers of America (ICBA) stated after Freddie Mac's Q1 financial results were reported, "is net loss will not trigger a draw from the U.S. Treasury as Freddie Mac's and Fannie Mae's capital buffer bleeds away. However, it is only a matter of time until one or both of them will need a draw, putting the housing market and taxpayers at risk. ICBA continues to call on Federal Housing Finance Agency Director Mel Watt and Treasury Secretary Jacob Lew to end this destructive sweep of the government-sponsored enterprises' revenues. Further, they should follow the Housing and Economic Recovery Act of 2008 and require both GSEs to develop and implement a plan to rebuild their capital buffers to prevent another bailout." Watt first sounded the alarm in February when he expressed concern in a speech at the Bipartisan Policy Center over the GSEs' lack of a capital buffer. at buffer, which is currently $1.2 billion, is required to be reduced to zero by January 1, 2018. e Watt speech immediately fueled speculation that GSE reform was imminent, but Treasury quickly put out the fire with a public statement that a recap and release was not going to happen. At that time, Treasury stated that, "Director Watt's remarks underscore the Administration's consistent position regarding the GSEs' conservatorship: e best long-term solution is comprehensive housing finance reform." Not only is the capital buffer dwindling, but the GSEs are not even keeping their profits. e bailout agreement was amended in August 2012, and since then all GSE profits have been swept into Treasury—a move that has triggered several lawsuits from GSE shareholders. In the first full year after the bailout agreement was amended (and not coincidentally in the minds of GSE investors who have sued over the profit sweep), the GSEs enjoyed a historic year for profitability in 2013—a combined $133 billion, largely from non-recurring tax-related items and legal settlements. By comparison, the GSEs' combined profitability for 2015 was $17.4 billion. Attempts have been made to reform the GSEs. Senators Bob Corker (R-Tennessee) and Mark Warner (D-Virginia) proposed a bipartisan bill in 2013 to eliminate Fannie Mae and Freddie Mac, and replacing them with a private insurance company system with a government backstop. e bill gained little traction. e Urban Institute has been publishing a series of essays written by economists and other housing experts about different GSE reform possibilities. Nearly everyone on both sides of the political aisle believe that GSE reform is necessary—it's just that no one can agree on a sustainable solution. "e problem is that I don't see a structured idea that is gaining momentum among the financial services industry or among Congressional staffers who inform Congressional leaders," Williams said. "Usually by this time, there is an idea that is 80 percent bait, and as far as the question whether this will be resolved soon, I don't see the crystallizing idea yet. Certainly a new president may say to folks around the beltway, 'It's time to crystallize. Give me your best option or two in the next six months.' It's pretty sad how long this has taken. It's just another symptom of a very dysfunctional legislature." "It's pretty sad how long this has taken. It's just another symptom of a very dysfunctional legislature." —Steve Williams, Principal, Cornerstone Advisors THE LEADER IN DEFAULT SERVICING NEWS Help shape the next issue of DS News. Drop us a line at Editor@DSNews.com.

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